Awash in oil wealth, region has growing charter appetite

Over the past few years executive charter brokers complained that there were not enough suitable aircraft available in the Middle East to meet the spiraling demand for private flying. But with each passing month, more new jets are flocking to this part of the world, boosting the fleets of local operators and correcting the supply/demand imbalance.

The recently forged alliance between Dubai-based Elite Jets and Jet Aviation is a prime example of how the market is responding to the burgeoning demand for high-quality charter services. Elite Jets (Chalet No. 31) has been growing over the past couple of years but its new relationship with one of the leading global players in aircraft charter/management should further boost its ascent. For Jet Aviation (Stand No. 731), the partnership allows it to expand its Arabian Gulf operations more quickly.

Having entered service with a single Hawker 850XP aircraft in January 2004, Elite Jets has since added a Cessna Citation CJ3, a Bombardier Challenger 604, a Dassault Falcon 900B and a Gulfstream 450. The G450 arrived in August and can carry six passengers out of Dubai on nonstop flights as far as Tokyo or Cape Town.

According to president and CEO Ammar Balkar, the company is set to add two more managed aircraft by year-end and aims to increase its fleet to 15 jets by the end of 2010. In his view, there is no prospect of a downturn in the Middle East market, partly because of the continuing tide of oil-derived wealth and also because governments are now investing in the infrastructure needed to support growth that has been somewhat artificially constrained.

Some of this growth will come from Arab-owned aircraft managed by Jet Aviation, which will now be moved to Elite Jets’ aircraft operator’s certificate in the United Arab Emirates. Elite Jets recently became the first locally based charter operator in the whole region to have completed the IS-BAO safety accreditation overseen by the International Business Aviation Council.

“The type of aircraft available [for charter] in this region are almost the same, so we are trying to create loyalty with a different level of service,” Balkar told MEBA Convention News. “We respond to requests for quotations within 15 minutes and can dispatch an aircraft within two and half hours. We also contact clients before they make their first flight with us to be sure we understand all their preferences and we keep these in a customer profile.”

Competition in the Middle East executive and VIP charter business has intensified over the past decade. In 1999, there was only one local operator and now there are at least 22. “There is some price-sensitivity now but it is not yet a major factor in how operators are chosen,” said Balkar. “Reliability and [fleet] back-up provision are more important to people here.”

The customer base for charter in the Middle East appears to be expanding enormously. “Ten years ago the use of private jets here was limited almost entirely to royalty and heads of state,” explained Balkar. “Here in the UAE just five or six years ago there was just one private owner and now there are dozens. There has been a learning curve because the laws [covering ownership and operations] have not been clear. Now with the introduction of light jets like the CJ3 priced competitively at $3,300 per hour we can attract executives using charter for the first time and we expect to be able to move these people up [in terms of size of aircraft chartered].”

According to Balkar, rising fuel prices have not dampened demand for charter flights. In fact, he said, because this situation is causing airline fares to rise proportionately faster than charter rates, it is encouraging new customers to try private charter.

Demand may be rising impressively, but things could be better for operators like Elite Jets. Balkar, who is also president and CEO of the Middle East Business Aviation Association, said there is a lack of dedicated airport infrastructure and that handling-agent monopolies need to be broken up to ensure better service. He also said aircraft manufacturers have generally not moved fast enough to establish maintenance facilities in the region. This is important because operators can’t register aircraft there until they can specify their local maintenance provider.

Abu Dhabi-based Prestige Jet (Chalet No. 23) is another fast-growing charter operator in the Gulf market. In September, it increased its fleet to 11 jets, adding a Cessna Citation Sovereign, a Bombardier Challenger 604 and an Embraer Legacy 600.

The company, which operates from Abu Dhabi’s Al Bateen City Airport, has indicated it may add more aircraft by year-end as it strives to double the size of its fleet by early 2009, having begun operations only in May 2007. It is committed to keeping its fleet balanced between small, midsize and large-cabin jets.

According to Prestige Jet managing director Faris Deeb, fleet utilization is now running at as much as 40 percent above targets. The arrival of the Sovereign, the Challenger 604 and the Legacy has greatly increased its ability to offer intercontinental flights connecting the Middle East with Asia and Europe.

Meanwhile, Jordan-based Arab Wings (Stand No. 813) has added a Citation CJ1+ to its fleet, which includes a G450, Challenger 605, Challenger 604, a pair of Hawker 800XPs, and a Beech 1900 and King Air B200. According to general manager Ahmad Abu Ghazaleh, the operator will add two more aircraft by 2009. Arab Wings has been in service since 1975, having formerly operated as the business jet division of the airline Royal Jordanian.